Timid governments bow to populism

Some tax reforms are so bleeding obvious that a disinterested observer must doubt the sanity and/or integrity of governments that fail to implement them.

An alternative reason for failure, though, might be the depressing rise of “popularism” - a bottom-up takeover of the political process by opinion poll and social media that leaves government timid and leaderless.

NSW Treasurer Michael Baird ... managed the first step by telling the truth about dopey tax on insurance premiums, but has failed to deliver the second leg.

To keep the topic out of the religious fervour that fogs federal politics, let's use an example from the ranks of state governments and then move to the general.

And to remove the imperative of imminent political survival, we'll use an example of a government enjoying a massive majority dealing with an issue that is a no-brainer for reform just to catch up with what happens in the rest of the country.

(If you're not from NSW, stick with the story because there is a broader message with a suggestion that there are both technological and generational reasons for the demise of political leadership.)

The O'Farrell coalition government might be redefining “cautious” as it slowly proceeds on several fronts to improve what it inherited in March last year. I'm assured reform is happening, various ducks are being arranged in rows, but it hasn't been rushed perhaps in deference to the trainer wheels on ministers and the new regime's suspicions about the public service.

Advertisement

However, some issues are too simple to deserve the pussy-footing treatment. Exhibit A: the current practice of funding nearly three-quarters of the emergency services budget by taxing the people who are responsible enough to take out insurance.

It took tragic bushfires and a Royal Commission to get Victoria to find the obvious path on this one, but they got there. NSW is still trying.

You will now receive updates fromBusiness AM Newsletter

Business AM Newsletter

Last week Treasurer Mike Baird bravely announced what he loosely called a “discussion paper” on Funding Our Emergency Services and called for “community feedback to develop a better, fairer and more efficient way” of funding said services.

Damning view

The treasurer's media release took just four short paragraphs to comprehensively damn the system he has been in charge of for 15 months and will enforce for several months more:

“The current system has serious weaknesses and is economically inefficient. Taxing insurance increases the price of insurance and can lead some people to under-insure and others not to insure at all.

You might think a competent Treasurer would be capable of saying: Right, that was the clear problem, here's the best solution. And you would be wrong.

“The system is also unfair because people who are either not insured or are under-insured do not contribute to the funding of our emergency services, but still receive the same coverage as those who do pay insurance.

“NSW property owners who insure their properties are subsidising the 36 per cent of households who don't have home contents insurance - the highest rate of non-insurance in Australia.

“A better and fairer system would spread the costs across the whole community. The Government is considering a number of ways to replace the current insurance-based levy to bring NSW into line with most States and Territories.”

(It goes without saying that the series of Labor governments before O'Farrell deserve condemnation for failing to get as far as issuing such a media release, but that miserable administration is now irrelevant.)

It was coalition policy in last year's election campaign to have a look at this inherently bad tax. That the promise was only to consider doing something, instead of a straight-out pledge to ditch it, also says plenty about wimp campaigns.

So, with all the expertise and expensive consultants available to it, never mind the off-the-shelf solutions available to it from what every other state and territory does, you might think a competent Treasurer would be capable of saying: “Right, that was the clear problem, here's the best solution”.

Leadership AWOL

And you would be wrong.

Instead there will be three months of “community consultation” which looks suspiciously like a mixture of push-polling, preparing the ground for discounts for National voters and backside-covering so that Treasurer Baird can claim the public, not the government, is imposing a “big new tax” on property owners.

Given that this small, beneficial and overdue tax reform was indeed greeted by the media with the new tax angle - “NSW eyes emergency services tax” – you might have some sympathy for Baird's mimsy positioning, but it also represents a lack of leadership.

Baird's on-line community feedback effort very neatly fits a pattern of political weakness that New York Times columnist Thomas Friedman blames for the rise of popularism:

“It's the über-ideology of our day. Read the polls, track the blogs, tally the Twitter feeds and Facebook postings and go precisely where the people are, not where you think they need to go. If everyone is “following,” who is leading?” asks Friedman.

Baird's online community feedback form seems to go a step further, pushing the technology out to the public under the name of consultation.

Too hard

With reference to the much bigger present failures of European and American governments, Friedman suggests both technology and generational change generate governments incapable of making hard decisions:

“The wiring of the world through social media and Web-enabled cellphones is changing the nature of conversations between leaders and the led everywhere. We're going from largely one-way conversations - top-down - to overwhelmingly two-way conversations - bottom-up and top-down.

This has many upsides: more participation, more innovation and more transparency. But can there be such a thing as too much participation - leaders listening to so many voices all the time and tracking the trends that they become prisoners of them?

“This sentence jumped out from a Politico piece on Wednesday: “The Obama and Romney campaigns spend all day strafing each other on Twitter, all while decrying the campaign's lack of serious ideas for a serious time. Yet at most junctures when they've had the opportunity to go big, they've chosen to go small.”

Boomers bomb

The generational thing is uncertain ground - everything has always been some generation's fault ever since we were capable of differentiating generations – but Friedman does it nicely:

“As for the generational shift, we've gone from a Greatest Generation that believed in save and invest for the future to a Baby Boomer generation that believed in borrow and spend for today.

"Just contrast George W. Bush and his father George H.W. Bush.

"The father volunteered for World War II immediately after Pearl Harbour, was steeled as a leader during the cold war - a serious time, when politicians couldn't just follow polls - and as president he raised taxes when fiscal prudence called for it. His Baby Boomer son avoided the draft and became the first president in US history to cut taxes in the middle of not just one war, but two.

Friedman quotes an executive coach who claims nothing inspires people more than being told the truth. That should be the minimum requirement for wannabe leaders.

In the NSW government example, Treasurer Baird has managed the first step by telling the truth about dopey tax on insurance premiums, but has failed to deliver the second leg: simply telling the public what the most efficient, fair and sensible solution is by way of a property tax and then doing it.

It means he's a big step ahead of the rubbish he's replaced, but still falls short of strong, honest leadership.

At the domestic federal level, it is of course worse, on both sides. Labor's flip-flopping before the last election at the whim of opinion polls might end up being viewed as the beginning of its end, while the appalling distortions preached by the opposition about the state of the economy are a long way from truth.